The humble granny flat is definitely undergoing a resurgence thanks to latest data from Flatmates.com.au. Private granny flat listings as a rental property increased by 16 per cent in 2016, while searches for granny flats jumped a whopping 84 per cent in the last quarter.
What’s driving the demand for granny flats? The current housing affordability crisis in NSW. The need for investors to find another way to make a better return on the land component of their property. Renters who are looking for more affordable housing across Sydney.
Unlike in Victoria where the name suggests a granny flat is still only allowed to house a family member, in NSW the government changed the regulations to allow a granny flat to be built on a residential lot at least 450 sqm and have a floor space of no larger than 60 sqm and be rented out to anyone.
Is it a granny flat or a small home?
The market has moved on in terms of modern efficient design, where the traditional granny flat is now more like a stylish, energy efficient small home, and with realistic returns from 10 – 15 per cent, it’s hard to find a better property investment return in the current Sydney market.
The most popular searched size of granny flat, a two bedroom 60 sqm, will cost around $120,000 to build. Given there is no additional land cost, the national average rental return that an owner receives is $283 per week, according to flatmates.com.au, with some Sydney returns doing quite a bit better.
That’s $14,716 in potential annual rental income and around a 12 per cent return on your investment.
And it’s not just investors considering the granny flat option. Older couples as well as young couples are putting up a hedge and a granny flat to pay off their mortgages sooner.
There are some risks. Finding the ideal backyard layout is a must as you can’t subdivide the lot, so both parties’ privacy needs, need to be taken into careful consideration. But while the market is offering these kinds of returns, and the potential is there to turn a negatively geared property into a positive one, it’s no wonder the traditional granny flat is undergoing a modern makeover.
